April 2018 GDP Forecast | No News is Good News for Georgia, as Forecasts Point to Stable Growth

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Created: 24 April 2018

ISET-PI has updated its forecast of Georgia’s real GDP growth rate for the first and second quarters of 2018. Here are the highlights of this month’s release:

ISET-PI’s forecast for the first two quarters of 2018 stands at 4.1% and 5.1%, respectively (no change from last month’s estimations).

Geostat has released its rapid estimate of real GDP growth for January and February of 2018. Estimated growth stands at 4.4% and 5.5%, correspondingly. As a result, the average real GDP growth for January-February 2018 reached 4.9%.

Based on February’s data, we expect annual growth in 2018 to be 4.6% in the worst-case or “no growth” scenario, and 5.6% in the best-case or “average long-term growth” scenario. Our “middle-of-the road” scenario (based on average growth over the last four quarters) predicts 4.8% real GDP growth.

Based on the February 2018 data, our forecast for the first two quarters of 2018 has not changed significantly. Most of the explanatory variables in our model remained quite stable in February. The most meaningful yearly changes were observed for variables related to the deposits of various maturities in commercial banks and to external sector statistics.

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GDP Forecast Methodology

The Georgian Index of Leading Economic Indicators provides current-quarter and one-quarter-ahead GDP forecasts for those who need to make business and policy decisions and cannot wait until the official statistics are announced several months later. According to methodology, our forecast is similar to those conducted by leading research institutes around the world. In particular, ISET-PI adapted the methodology that was originally developed by the New Economic School to forecast GDP for the Russian Federation. We would like to acknowledge the help of Prof. Konstantin Styrin (NES) who agreed to share his MATLAB code with ISET-PI, and the assistance of Dr. Andrei Sarychev in modifying and adapting the code for Georgia‘s needs.